Foundation for Economic Freedom Pleads for Original TRAIN

Original TRAIN backed by Former DOF Executives

Former high-ranking officials of the Department of Finance (DOF) have appealed to the Senate to preserve the revenue requirements under the Duterte administration’s Tax Reform for Acceleration and Inclusion Act (TRAIN) that are intended to support the government’s massive investment program for high and inclusive growth.

Ex-DOF Secretary Roberto de Ocampo, a member of the Foundation for Economic Freedom (FEF), said during a recent hearing of the Senate ways and means committee that he is supporting the proposed in its original form as the measure would improve tax compliance, and bring in more investments that would create more jobs, thus benefiting the country’s underprivileged sectors.

FEF, an advocacy group for good economic performance and market-friendly reforms, is among the 200 organizations and institutions that have expressed their support for TRAIN.

Former Finance Undersecretary Romeo Bernardo, who also attended the hearing, made a more direct appeal “to preserve as much as possible the original revenue requirements” under the original TRAIN as proposed by the DOF, more so now that the government is facing the burgeoning requirements of funding the law on providing free tuition and other fees for enrollees in State Universities and Colleges (SUCs), the pensions for uniformed personnel and the increased social security benefits for retirees.

Another former finance chief, Margarito Teves, underscored the “importance and urgency” of passing TRAIN in its original form to “enable the government to finance our growing needs as a developing country, such as accelerating infrastructure development, closing the gaps in health and education and improving social protection programs for the poor and marginalized” while staying within the manageable deficit level of not more than three percent of GDP

The position of the FEF, which has among its prominent members Teves and Bernardo, was read by the latter during a recent Senate ways and means committee hearing a week before the Senate’s version of the TRAIN was approved by the panel and endorsed by its chair, Sen. Juan Edgardo Angara, for plenary approval.

The original DOF proposal for TRAIN aims to lower personal income taxes while raising an additional P157 billion in net incremental revenues during the first year of its implementation in 2018. The House version approved a P134 billion package.

Ex-NEDA director general Felipe Medalla, who is currently a member of the Monetary Board and also of FEF, said the TRAIN is necessary to maintain the Philippines’ debt-to-GDP ratio and reduced cost of borrowing, which is now even lower than that of Malaysia and Indonesia and on par with Thailand.

According to FEF’s position, “it believes that the comprehensive tax reform program will allow every Filipino an equitable opportunity to contribute to a sustained and truly inclusive economic growth.”

“​With the right set of policies and programs that create an enabling environment for private sector investments, the Duterte administration can achieve its growth target of at least 7% annually, reduce poverty from 21.6% to around 13-15%, and significantly reduce unemployment rate over the next six years. Fiscal stability, sustained funding for government programs, and investment-friendly tax policies can help the government attain these objectives.”​

The FEF said the entire TRAIN ​package can “help raise the additional one trillion pesos needed annually to fund investments in infrastructure, education, health, social protection, training, and research and development. “​

Moreover, its design and various components address identified problems in the current tax system namely:

a narrow tax base;

complex collection policies with numerous leakages;

cumbersome and costly exemptions with debatable benefits;

inequitable taxation of salaried workers;

uncompetitive rates vis-a-vis our country’s peers; and

tax policies that are prone to gaming, evasion, and corruption,

“We particularly support the downward adjustments in the personal income tax on the grounds of fairness. We also strongly back the reduction in the corporate income taxes, which will promote and attract more investments and facilitate job creation.”

It further expressed its support for the key revenue-enhancing measures and “commend(​ed)​ the proposals for incremental revenues for public investments,” notably:

the increase in fuel taxes;

the rationalization and reduction in fiscal incentives;

the selective lifting of bank secrecy laws with respect to fraud; and

the expansion in the VAT base (including lifting of exemptions on cooperatives, low-cost housing, renewable energy, and for senior citizens except medicine)

The FEF has for its Board of Advisers, former Prime Minister Cesar Virata and former Socio-economic Planning Secretary Dr. Gerardo Sicat.

Its Board of Trustees is chaired by de Ocampo, and includes Bernardo as vice-chairman, political economist and entrepreneur Calixto Chikiamco as president, former Finance Secretary Ernest Leung as treasurer and Ricardo Balatbat as executive director and corporate secretary.

Alexa Rank

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